“Meat Cleavers Work”

Of course, the sequester was ill-timed, and has probably hampered America’s economic recovery. That shouldn’t stop us from drawing some general lessons from the experience, though. Meat cleavers work, and they aren’t in practice so indiscriminate as they may seem to be. They focus attention, clarify priorities, and lead to the swift discovery of previously unimagined economies. That the effect of the sequester has been relatively benign so far strikes me as a data-point in favour of relatively inflexible fiscal rules, such as debt-ceilings and balanced-budget amendments, capable of somewhat offsetting the diffuse-cost/concentrated-benefit dynamic that otherwise drives democracies toward imbalance and ruin.

Democracies are driven toward imbalance and ruin? Which democracies does he have in mind?

Democracies are the wealthiest countries on the planet; as a rule, they have better credit ratings than other forms of government. Perhaps democracies do have a tendency to use taxpayer money to reward interested groups, but they seem to do so less than other forms of government, or else to have other built-in advantages that counterbalance this problem, such as stable property regimes, the rule of law, and confidence in the ability to levy taxes to pay back debt, due to the consent of the governed. In some particular democracies, excessive generosity with taxpayer money may be more of a problem than in others, and may retard economic growth; one thinks of high government debt levels in Italy. But Italy’s problems arguably have less to do with government debt than with rigid business patterns, corruption and cronyistic regulations, not to mention low birth rates; and democratic governance has in fact succeeded in getting Italy’s budget back to primary surplus (unwisely so, in the midst of Europe’s recession). In any case, this doesn’t seem to be a problem that afflicts America, which is among the world’s richest nations and has very good growth rates for a developed country.